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Think that Free App is Really Free? Mobile In-App Purchases

With billions of smartphone users on the planet, apps are big business, to say the least, and the cool part is that most of them are free. But if you think businesses and “basement coders” take the time to offer this technology for the love of, well… technology, then you’re sadly mistaken. That free app does cost; you just don’t know it.

There’s a revenue model built into every app that’s offered, whether it’s designed to introduce you to the product, and then sell you a premium version, or is laden with ads for you to click on. In 2011, revenue from in app purchases were $712 million. It’s estimated that by 2018, that number will be over $36 billion. That’ a lot of money and the trend keeps getting higher as more people start to use smartphones, and more businesses advertise using mobile technology.

Games are among the most downloaded free and paid apps, so it’s no coincidence that they also dominate the in-app purchase arena. The interesting thing is that people who make these purchases, for the most part, feel that they’ve gotten their money’s worth when spending no more than $20. But the level of satisfaction tends to drop, the more consumer spend on these apps. Which begs the question: Is this a sustainable revenue model for the future? For now, the answer is absolutely yes.